Savills Research I Singapore

Sales & Investment

1 November 2011

"Investment activity in Q3/2011 moderated amid growing economic uncertainties. Nevertheless, transactions totalling S$21.3 billion were recorded for the first three quarters, 5.6% higher compared with the same period last year."

Image: RCL Centre, Keppel Road

Investment sales totalled S$4.51 billion in Q3/2011, about half of the S$8.51 billion recorded in Q2. The private sector dominated the market with S$2.97 billion of investment transactions, accounting for 65.7% of all investment sales in the quarter. In contrast to the declines in the residential, commercial and hotel markets, the industrial sector was the bright star in the private sector, with a quarterly increase of 171% in terms of transaction value.

Ten land parcels worth S$1.55 billion were awarded under the Government Land Sales (GLS) Programme. The whole year's investment sales are expected to reach S$27 to S$28 billion.

Savills Research
MICA(P) No. 212 / 09 / 2011

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Sales & Investment

Market overview
Investment transactions worth approximately S$4.51 billion were recorded in Q3/2011, falling 46.9% quarteron-quarter from Q2s total of S$8.51 billion. Transaction value of investment sales, Q1/2009 Q3/2011
Public 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 S$ million Private

Weaker prospects for the US and eurozone economies, coupled with the volatile stock market, have dampened market sentiment among developers, funds, individual investors and end users alike. Caution prevailed in the market, as evidenced by the thinning number of big deals that were transacted and subdued responses to the state land tenders, which received more realistic bids. For example, there were only 11 private-sector transactions over S$50 million each in the reviewed quarter, signicantly less than the 20 deals in Q2. The top bids for several sites from the GLS Programme, such as the industrial site at Woodlands Avenue 12 (parcel 3), two residential sites at Upper Serangoon and a commercial site at Robinson Road/Cecil Street, were noticeably lower than prices of nearby plots sold at earlier dates. Investment sales by property sector, Q3/2011

Q1 Q2 Q3 Q4 2009 Source: Savills Research & Consultancy

Q1 2010

Q2

Q3

Q4

Q1 2011

Q2

Q3
Industrial S$1,28 bil (28%)

Private-sector investment sales accounted for a bigger share of total investment sales at 65.7% or S$2.97 billion, while the public sector chalked up the remaining 34.3% or S$1.55 billion. On a quarterly basis, the private sector saw a decline of 26.7% from S$4.05 billion in Q2. The residential, commercial1 and hotel sectors saw declines in transaction values in the order of 46.1%, 56.1% and 43.9% quarter-on-quarter. On the other hand, the industrial sector was the star performer, surging 170.5% from S$418.6 million in Q2 to S$1.13 billion in Q3. The increase was boosted by the divestiture of the second phase of JTC Corporations (JTC) industrial properties and industrial REITs portfolio acquisitions. In the public sector, ten government land parcels, comprising six residential sites, three industrial sites and one commercial site, were bought by developers. Similarly, sales volume was 65.3% lower than the previous quarter, partly due to the high base in Q2 when 15 state land parcels were sold.

Residential, S$2.20 bil (49%)

Hotel S$194.1 mil (4%)

Commercial S$848.3 mil (19%)

Source: Savills Research & Consultancy

Residential
Total investment sales in the residential sector amounted to S$2.20 billion in Q3/2011. In spite of a 50.4% drop from Q2, this sector still accounted for the highest share (48.6%) in total investment sales. In the public sector, six residential sites under the GLS Programme were sold for a total of S$1.1 billion. While choice sites with good locations continued to receive overwhelming responses from developers, bids have been more reasonable, indicating developers cautious stance in view of ample supply from the GLS Programme and price resistance for private residential properties. For example, while the non-landed parcel at Upper Serangoon Road/ Pheng Geck Avenue attracted a total of 15 bids, Tuan Sing Holdings top bid of S$185 million or S$567 per sq ft per plot ratio (psf ppr) was 6.6% lower than the price of an adjacent site which was awarded in June 2010.

Including ofce and retail

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Sales & Investment

The collective sale market has moderated in Q3 with ve transactions worth S$453.5 million. The largest transaction was the S$171.1 million sale of Hong Leong Garden Shopping Centre, followed by Whitley Heights which was sold for S$159 million. The other three deals Grand Tower, Daisy Apartments and Permai Court, were below S$100 million each. Uncertainty surrounding the property market, together with sellers unrealistic price aspirations, has limited the number of successful sales. This is particularly so for the large leasehold sites competing for the same capital as GLS sites, which have the advantage of offering a more certain and expedient sales process. Therefore, smaller sites might still be wellreceived, albeit at prices that are reective of prevailing conditions. The retail investment market remained relatively active with the sale of ve shophouses, one strata-titled shop unit in Peoples Park Centre and the entire Bedok Point. Frasers Centrepoint Trust (FCT) bought Bedok Point, the rst mall in the Bedok area from Frasers Centrepoint Limited for S$127 million, S$1,568 per sq ft on a net lettable area of 80,985 sq ft.

Industrial
Industrial investment sales totalled S$1.28 billion in Q3/2011, forming the second highest share (28.3%) of total investment transactions after the residential sector. The most notable transaction in the private sector was the second phase divestiture of JTCs industrial properties for S$688.6 million. Soilbuild Group Holdings Ltd was awarded ten blocks of atted factories and amenity centres for S$288.3 million, while Mapletree Industrial Trust (MIT) acquired the remaining 11 blocks for S$400.3 million. Following a relatively quiet Q2, industrial REITs resumed their acquisition trail in the reviewed quarter. Besides the acquisition of JTCs properties by MIT, Q3 saw another ve acquisitions by REITs. Among these, Cache Logistics Trust bought 22 Loyang Lane for S$13 million, while Sabana REIT purchased four properties for S$132.3 million, the rst time since its listing on the Singapore Exchange last year. In the reviewed quarter, three industrial sites located at Tuas View Square, Pioneer Road North/Soon Lee Road (parcels 3 and 4) and Woodlands Avenue 12 (parcel 3) were sold under the GLS Programme for a total of S$143.6 million. The Woodlands site received only four bids, with the top bid being 6.6% less than that of the neighbouring plot sold in June, due largely to the weakening sentiment and the perceived abundance of industrial space in the area.

Commercial
Commercial investment sales, amounting to S$848.3 million, accounted for 18.8% of total investment sales in Q3/2011. It shrank by 53.1% quarter-on-quarter from S$1.81 billion in Q2. The market response to the state tender of a 0.29-ha commercial site located at Robinson Road/Cecil Street was tepid, with just three bids and a top bid of S$311.8 million or S$882 psf ppr, which is reasonable in view of the increasing vacancies and moderating rents experienced in the CBD ofce market. Two ofce buildings changed hands in the reviewed quarter RCL Centre on Keppel Road for S$175 million and a small ofce building at 182 Clemenceau Avenue for S$74 million. It was noted that the buyers for these two properties were Asia-based private investors. Unlike institutional funds who have dominated the market in the previous years, these regional high net worth buyers do not only look at investment yields, but more at capital preservation, particularly under the current high-ination environment. Three strata ofce properties were transacted above S$10 million in Q3, down from six recorded in the previous quarter. Despite the subdued activity, the transacted prices by square footage S$2,800 per sq ft for the 20th storey of Samsung Hub and S$2,880 per sq ft for the 42th storey of Suntec City Tower 1 were the highest in the last ten years.

Hotel
Singapores tourism industry has been robust in 2011. In the rst eight months, Singapore welcomed a total of 8.8 million visitors, representing a 15.5% increase yearon-year. The rosy performance of the tourism industry has fuelled market confidence in Singapores hotel market. As a result, the market witnessed a pick-up in hotel acquisitions.

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Sales & Investment

Three hotels were sold in Q3/2011 Ibis Novena (241 rooms) on Irrawaddy Road for S$118 million, New Cape Inn Hotel (61 rooms) on Seng Poh Road for S$34 million and The Saff Hotel (79 rooms) on Keong Saik Road for S$42 million. Investors have turned their attention to small-scale investments (such as hotels with no more than 200 rooms) due to limited offerings in the market and mounting risks emanating from the current turbulence in the global economy. Major land sales under the GLS Programme, Q3/2011
Location Type of Date of development award allowed Successful tender price S$ mil S$ psf ppr 311.8 882 Name of successful tenderer

Major private investment sales, Q3/2011

Property Eleven blocks of atted factories and amenity centres Ten blocks of atted factories and amenity centres RCL Centre Hong Leong Garden Shopping Centre Whitley Heights Sector Industrial Transacted Price date (S$ mil) Jul 2011 400.3 Buyer MIT

Industrial

Jul 2011

288.3

Soilbuild Group Holdings Private Indonesian investor A consortium led by Oxley Holdings Hoi Hup Realty

Ofce Residential Residential

Jul 2011 Sep 2011 Sep 2011

175.0 171.1 159.0

Source: Savills Research & Consultancy

Robinson Road/ Cecil Street Upper Serangoon Crescent/Upper Serangoon Road Punggol Way/ Punggol Field

Commercial

Sep 2011 Sep 2011 Jul 2011

Boo Han Holdings Pte Ltd and Pearlvine Pte Ltd Allgreen Properties Ltd FCL Tampines Court Pte Ltd and Keong Hong Construction Pte Ltd Clerodendrum Land Pte Ltd Capital Development Pte Ltd/ZACD Investments Pte Ltd

Outlook
Eurozone debt jitters and a potential double-dip recession in the US continue to weigh on the market. Compared with the preceding quarters, the higher risk environment may prolong investors decision-making process. However, choice properties and prime sites that are well-located with longer tenure and better specications will continue to attract interest. Therefore, the investment market is likely to stay healthy for the rest of the year, with investment sales reaching S$27 billion to S$28 billion for the whole of 2011.

Non-landed residential Non-landed residential (executive condominium) Non-landed residential Non-landed residential

270.3

292

219.5

270

Upper Serangoon Road/Pheng Geck Avenue Punggol Field/ Punggol Field Walk

Aug 2011 Sep 2011

185.2

567

169.6

323

Source: URA, HDB, Savills Research & Consultancy

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